JOUMANNA: GOOD MORNING, THIS IS HORIZONS MIDDLE EAST & AFRICA. ASIAN STOCKS AFTER JAY POWELL SIGNALS AN INTEREST RATE CUT COULD COME AS SOON AS NEXT MONTH, DESPITE DIVISIONS OVER CHALLENGES IN INFLATION IN THE JOBS MARKET. THE U.S. GOVERNMENT TAKES A 10% STAKE WORTH $8.9% BILLION IN A BID TO REINTEGRATE INTEL AND BOOST DOMESTIC CHIPMAKING.EARNINGS AHEAD, IN THE SPOTLIGHT AS WE LOOK AT SOME COMPANIES RELEASING RESULTS THIS WEEK. I AM BACK IN DUBAI AFTER TWO WEEKS OFF. WE HAVE A LOT TO TALK ABOUT TODAY ESPECI ...

Industrial metals and iron ore rose after Federal Reserve Chair Jerome Powell’s speech at the Jackson Hole symposium, where he signaled the central bank would likely cut interest rates next month https://t.co/ENYXKbUDaB ...

Economic Recovery - New Zealand retail sales unexpectedly increased in the second quarter, indicating a potential economic recovery [1] - Lower interest rates are starting to support household spending [1]

🚨 UPDATE: There is now a 75% chance of a rates cut in September. https://t.co/2OlNyb25DT ...

Inflation has direct and indirect effects on real estate, and on this real estate investment trust's business as a whole.Core U.S. inflation rose by 0.3% month over month in July, its highest increase in six months. That put the trailing-12-month inflation rate at 2.7%.The Motley Fool has studied inflation, and it's a fascinating look at the prices we pay. In the past, the S&P 500 has performed well when inflation was within its current range. But, be careful. When inflation runs hot and prices increase too ...

Monetary Policy Stance - The Fed is under pressure to cut rates but is seeking more data before committing [1] - The Fed is subtly shifting expectations towards a rate cut, acknowledging a shifting balance of risks [2] - The shifting balance of risks may warrant adjusting our policy stance [2] - A rate cut in September is not guaranteed, and the August labor market numbers will be critical [12][13] Labor Market Analysis - The labor market appears to be softening, with a slower pace of hiring due to decreased immigration [3][4] - The labor market is weak enough that the Fed doesn't foresee substantial inflation increases from second-round effects [5][6] - The balance of risk on labor is tilting to the downside, even as inflation risks are to the upside [3] Inflation Concerns - Core inflation remains well above the 2% target, and has not budged downwards [6] - There was no mention of the fact that we haven't seen a downward adjustment in inflation [7] - Tariffs are expected to push inflation up, but the Fed is primarily concerned with inflationary expectations feeding into wages [5][10] - The Fed will do what it takes to keep inflationary expectations anchored [10] Fed's Framework Review - The Fed is revisiting its framework, acknowledging that the previous framework was designed for low inflation, the opposite of the current problem [14][15][16][17] - The Fed is moving back to its old framework [17] Chair Powell's Legacy - Chair Powell is likely to get less credit than he should for navigating the Fed through difficult times towards a soft landing [19] - Chair Powell has displayed immense calm and equanimity amidst external pressures [20][21]

Ethereum set a new all-time high, breaking its previous 2021 record after Jerome Powell signaled the Fed would cut interest rates. https://t.co/4zqeWqg5VE ...

Interest Rate & Yield Curve Impact - Potential Fed rate cuts as early as September could steepen the yield curve, benefiting banks' net interest income [2] - Rate cuts of 25 to 50 basis points between now and year-end, and potentially further next year, are anticipated [5] Loan Growth - Consumer loan growth, particularly in credit cards, has been robust over the last two years [3] - Corporate lending has been modest, but commercial and industrial lending has shown a pickup in the last 6 to 8 weeks [4] - The industry could see loan growth exceeding 4% on an annualized basis in the current (third) quarter [4] Regional vs Money Center Banks - Regional banks benefit more from a steeper yield curve because they generate 65% to 70% of revenues from net interest income (spreads) [6] - Money center banks like JP Morgan and Bank of America generate closer to 55% of revenues from spreads [6]

Interest Rate Policy - The market anticipates a 25 basis point interest rate cut in September following guidance from Jerome Powell [1] - The Federal Reserve's decision-making will be data-dependent, assessing economic outlook and risk balance [1] - A friend of the company suggests that cutting rates into an economy where PMIs are going higher is just going to help the market in a significant way into the end of the year [1] - The company friend does not think the Fed should do a 50 basis point cut [1] Labor Market - The labor market is now considered more important than inflation in the Fed's decision-making [1] - Estimates suggest potential benchmark revisions for labor, indicating 500,000 to 900,000 job losses [1] - The labor market is more fragile than the 42% jobless rate suggests [2] Market Reaction & Economic Impact - Stocks surged 80 points and Bitcoin gapped up from $112,000 to $116,000 in response to the news [2] - Lower interest rates are generally viewed as beneficial for businesses, consumers, and investors, potentially leading to economic growth [2] - History suggests that a period of 5 to 12 months between Fed cuts is typically bullish for stocks, with the S&P 500 rising in 10 out of 11 instances [2]

Fed Rate Cut Expectations - The market initially priced in a 65% probability of a rate cut, which increased to nearly 90%, but not fully priced in for September, suggesting lingering concerns about inflation or employment data [1] - The market had priced in over one rate cut two weeks prior, but the probability decreased to 70%, reducing the need for the Fed to counter the market [3] - Bank of America initially anticipated no rate cuts this year, a view largely out of consensus, primarily due to strong inflation data [5] Fed's Stance and Rationale - The Fed believes it is starting from a restrictive stance, viewing rate cuts as recalibration rather than stimulus [2] - The Fed is under political pressure, and a dovish tone could invite criticism, influencing the decision to lower the temperature [4] - The Fed is closely monitoring the labor market, balancing supply and demand, and awaiting further jobs data to determine future actions [7][8] Data Dependence and Future Outlook - The Fed will remain data-dependent, potentially looking past inflationary risks if they perceive it as a one-time adjustment rather than a long-term trend [8] - A more rapid rise in the unemployment rate could lead to more aggressive rate cuts, with expectations of a modest rise leading to two cuts this year as part of recalibration, avoiding recession [9] - While nominal rates are declining, inflation compensation is rising, suggesting the market may show signs of inflation targets moving higher and becoming unanchored from the Fed's 2% target [11][12]